Financial Supply Chain Management
Financial Supply Chain Management (FSCM) has gained increasing importance particularly during the latest financial crisis. Both, managers and scholars agree that FSCM is a necessary step towards efficient supply chains. While back in the 1990s, optimizing the physical product flow along supply chains gave firms a competitive advantage, nowadays some firms reach their limits as further improvement potentials of the physical supply chain are increasingly hard to identify. However, one area still abundant of potentials is FSCM since it considers the physical and financial flows simultaneously and holistically, i.e. planning, managing, and controlling of all processes and transactions related to financial flows along the entire supply chain. FSCM helps firms identify further means of reducing their working capital and improve processes along their supply chain, resulting in increased profits. For that reason we look further into FSCM.
As the following figure illustrates, FSCM is the interface of supply chain management, corporate finance, and risk management. Even though some aspects appear well known, it is the holistic and integrated framework that marks the difference and poses challenges on managers and researchers.
The research topic Financial Supply Chain Management manifests a main pillar of the research activities at the ISCM. Research results, which have been published in renowned A-ranked journals and which have been published at international conferences such as the POMS or EDSI conference, make strong contributions on different levels of abstraction.
Some research topics are positioned at very fundamental levels, for instance in order to lay a theoretical foundation of FSCM within an organizational power-dependency-framework. The other extreme are business and application oriented questions, for instance how firms should optimally manage the adoption of the supply chain finance innovation or who in a supply chain should hold the inventory, if financing costs are taken into account. With such a broad scope, the research conducted at the ISCM provides innovative solutions for companies as well as it helps to deepen our understanding of the operations management and finance interface. The broad scope of research topics is depicted in the following figure, which summarizes some of the research questions to which research of the ISCM replies to.
Since the foundation of the research group Financial Supply Chain Management in 2009 extensive method knowledge has been accumulated and applied successfully in numerous studies. These competencies are necessary to study the multi-dimensionality and complexity of FSCM in an efficient manner. In particular the competencies comprise:
- Formal-analytic modeling (inventory management, stochastic differential equations, innovation-diffusion modeling)
- Game theory (cooperative and non-cooperative)
- Quantitative empiric studies (secondary data)
- Qualitative-interpretative studies (grounded theory, theory building)
Protopappa-Sieke, M., Seifert, R.W., 2011. Interrelating operational and financial performance measurements in a multiproduct inventory system. International Journal of Services and Operations Management 10(3), 328-347.
Protopappa-Sieke, M., Seifert, R.W., 2010. Interrelating operational and financial performance measurements in inventory control. European Journal of Operational Research 204 (3), 439-448.
Many companies have already cooperated with the ISCM in research topics related to FSCM. Not only since the financial crisis FSCM has become an “A-item” on company’s agendas in almost all industries, because companies have recognized the enormous potentials in managing the financial flows in their supply chains. Notably ISCM’s projects are:
- Optimization model for inventory financing with a 3PL-provider
- Qualitative benchmark about FSCM with a chemicals company
- Quantitative study about Supply Chain Finance with a major bank
In addition to these co-operations regarded as contract research the ISCM regularly organizes workshops and practice days: For example, the first Supply Chain Finance Symposium in 2011 with experts from practice and international top-researchers. This symposium, being continued at MIT Zaragoza in 2012, offers a platform to discuss both research ideas and practical problems and connects practice with academia.
Also, the “Practice Day FSCM” was a successful event organized by the ISCM in 2011 to bring practice and academia together. More than 20 experts discussed the results of a qualitative benchmark study and best practices together with researchers of ISCM. Participants concluded: The topic FSCM is very important, but still in an early stage of development. Also, co-operations between academia and practice are fundamental to uncover the main potentials.
The figure below emphasizes the embedment of FSCM topics within a stylized supply chain with a 3PL-provider. ISCM can cover many of these topics with leading research knowledge and conducts projects applying this research with companies of all industries. In particular, the figure highlights the multifaceted links between FSCM and operative tools making the supply chain more efficient.